Moody's Downgrades Vedanta Resources' Ratings Over Refinancing Risks

Caa rating signifies poor standing and very high credit risk for obligations. The modifier 1 means the obligation ranks at the higher end of its generic rating. 

Vedanta Ltd's shares closed 1.98% lower at ₹279.85 apiece on the National Stock Exchange on Friday, in reaction to the downgrade.

Kaustubh Chaubal, Moody's senior vice president, stated that delays in refinancing efforts and continued reliance on dividend receipts are reducing liquidity at VRL's operating subsidiaries.

"We previously expected holdco VRL to find sufficient funds through loans and dividends to address its debt maturities until June 2023. However, VRL faces ongoing delays in obtaining funds relative to our earlier expectations amid a funding environment that remains challenging with high interest rates, scarce market liquidity and tight credit availability," adds Chaubal who is also Moody's Lead Analyst for VRL. "These issues expose the company to material refinancing risks and exacerbate the likelihood of a payment default or a distressed exchange."

VRL's subsidiaries are looking for creative solutions to raise funds and address the holdco's cash needs. 

However, their liquidity is depleting, and the potential for contagion risk from the holdco's debt woes may impair the operating subsidiaries' ability to raise funds, according to the statement, Moody's said.